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2buyornot2buy

Mse Fraser/momentum Mortgage

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I noticed this thread on mse I thinks is worth a read. First time buyer looking to take out a ridiculous product impo.

http://forums.moneysavingexpert.com/showthread.php?t=3009456

Take a look at the example quoted on Fraser's on buying/renting. The figures are for a 35 year mortgage at unachievable interest rates. If you use ulster banks momentum product it is much cheaper to rent.

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I just don't get how they pick figures from the air to compare products. On the site they compare buying versus renting and use a co-ownership model where the buyer purchases half and rents half.

Is there anyway to make a complaint about this tripe? It seems they can get away with saying what they like.

The person in question makes 24k and wants a mortgage of 142500 . Crazy.

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I might of missed something here. I assume we are discussing the Momentum Mortgage product. Personally I hate them as it is a way for the bank to gobble more off the developer. However, for a purchaser they are an excellent choice. Basically if prices drop (up to 10%) from today's value in five years you will have your mortgage reduced by that amount (again up to 10%). If the prices increase by more than 5% you will have to pay the builder the 5% deposit he paid on your behalf. All in all a 15% protection. The property has to be independently valued to make sure the builder is not adding this on. The Bank will only allow 25% of the development to be sold this way and then watched what houses on normal mortgage products sell for.

Whilst I (with a developer hat on) don't like them, as I think they have done their job. If I were a buyer I would look at this product.

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Do you not think the momentum mortgages keep the prices artificially high since it attracts people with no deposit who must be high risk (as has been proved in the past)

You could say that about lending in general. When the supply of credit is restricted the asset price will fall. when it is increased the asset will rise. We all seen what happened when the supply of credit was abnormally available.

When we were discussing the makeup of this product with the bank I was surprised about the inclusion of the builders 5% deposit. Not because of selfish reasons but I don't like the idea of giving someone a house without them having at least some equity in it. To me, if they haven't been able to set aside or save a t least 5% they shouldn't be offered a 20 year mortgage. But that's just my view. I believe the bank looked at it as passing the risk of loosing that deposit onto the builder, which is something different. If that was the banks view, whilst I understand it I would still have been happy with the purchaser making some commitment.

Still trying to get my head around your notion of keeping prices artificially high after a 45% price drop. If it was designed to do that it has failed miserably. This product was introduced in Autumn 2008. Since that the prices have fallen, on average 15%. However most of that is in the resale market. Looking at what we done, we dropped the prices 5%, gradually up to May 2009. And they are pretty much the same since. So if that is reflective of other new build then people who purchased without this scheme have probably lost 5 to 10%, if they were to sell today. Those who purchased with momentum have lost nothing and have another 5 to 10% cushion. Anyone buying now, with this scheme have the full 15% cushion for the next 5 years.

Rather than attracting people with no deposits I would say that it attracts people who don't wish to risk their deposit.

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with regard to my post saying this momentum mortgage keeps prices artificially high. Could you answer the following question Belfast VI.

Do you think that the houses being sold under this scheme are better value/ as good value/ or worse value than the houses your company sells at present.?

I am quite happy for you to say no comment since I realise it may be unethical for you to comment.

What I am trying to get at is --- are the houses being sold by this company with a 15% deposit from the builder - at an artificially high price in the first place so the builder can make the 15% deposit?

I am happy to answer and hope it will clear your concern. I think we have two developments that have the availability of the Momentum mortgage. From a cash-flow point of view I don't like them (they did their job at one time) so we don't promote them. We offer our houses for sale (with New build that's a fixed price). The house is booked and the buyer, if they havnt already sorted a mortgage goes off to their broker/bank to seek finance. If they go to the Ulster Bank they will be told that the site qualifies for a M mortgage and if they decide to use that product we are informed. We are only told as the contract and security will be totally to cover the deposit etc (this is issues between the bank and builder rather than the purchaser).

The point is it is normally only after the deal is done that we learn about the type of mortgage. Even if the buyer came in saying they wanted to use this product, prior to the sale -it makes no difference. All our prices are on the sales sheets and several web sites. We cant just up the price because it is a different mortgage. The buyer would see through it and the valuers would smell it a mile off.

Another point. - We cant pick the houses that this is available on. If the site is eligible and a purchaser wishes to take out this product so be it.

So to answer your question - it is just as good as value. The only difference is the extra comport of the 15% cushion the purchaser gets with this product. The Bank will only allow 25% of the houses on a development go through this product. They will then have good visibility at what the other units sell for on normal mortgages. They see all this as they have to sign the release on the title papers.

Just a small point. The UB Momentum mortgage has a 5% deposit, paid for by the builder (to be repaid to the builder in 5 years if the house value has increased by at least that amount). If the house falls in value, in 5 years time the mortgage will be reduced, by that amount (up to 10%). So this is a total of 15% and not a deposit of 15%.

Edited by BelfastVI

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The UB did a bit of a number here. even though prices were increasing they carried out their own valuations and wouldn't disclose them to the builder or house owner. As you could imagine some builders were a bit niffed. We had a number of them but just let it go as 'that ship had sailed'. However I am not at all surprised that some builders are having a go at this. It would have been O so simple to have an independent valuation produced and made available to all parties.

In many of the cases the prices didnt rise by the 5% that would have allowed the builder his money back but again UB couldn't be straight about it. Therefore all the purchasers get the builders deposit.

 

The product was available on almost all of the active sites the UB were lenders on regardless of the financial status of the builder.

Edited by BelfastVI

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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